Obama's legacy will turn on economic results

The economy will determine whether Barack Obama achieves what few presidents have: a far-reaching change in American politics that might even earn its own title and legacy.

Will there be an Obama version of the New Deal, the Great Society or the Reagan Revolution?

Afghanistan, North Korea and other foreign hot spots certainly will test Obama. But the deeply troubled economy is his signature challenge and the focus of his greatest efforts, attention and gambles in his first 100 days in office.

Of course 100 days is just the start, too little time to determine the results (let alone the wisdom) of his decisions. But it's enough time to discern the path Obama has chosen, the overarching philosophy that will shape his administration and history's eventual judgment of it.

In a way, Obama is reversing the famous dictum of President Ronald Reagan, who said government is the problem, not the solution.

Confronting the worst economic crisis in more than a half-century, Obama is dramatically increasing the government's role in overseeing banks, helping homeowners avoid foreclosure and even determining who runs General Motors Corp. or merges with Chrysler LLP. Pouring billions of dollars into the efforts, he is stoking a huge federal deficit that could haunt him, and the nation, if it does not recede sharply in the next few years.

"Obama is Reagan with a minus sign," said William Galston, a Brookings Institution scholar and former Clinton administration official. Just as Reagan tried to undo President Lyndon B. Johnson's government-financed Great Society, Galston said, so Obama "is trying to undo Reagan and Reaganism."

Obama's domestic agenda would be huge even if he focused only on reviving the moribund economy and addressing the recession's causes, including loosely regulated lending and a collapsed housing market. But he has gone much further, calculating that a crisis creates the best environment for ramming big changes through Congress.

He's proposing a vast extension of health insurance, increased federal spending on education and energy and a strategy for reducing greenhouse gases by slapping a high price on their production.

Obama rejects claims by some lawmakers that he is trying to do too much at once.

"I'd love if these problems were coming at us one at a time instead of five or six at a time," he said recently. "It's more than most Congresses and most presidents have to deal with in a lifetime," he said, but it's time to tackle them.

So far, people in the U.S. are showing a significant degree of confidence in Obama's ability to improve the economy. The latest AP-GfK Poll, for example, found that 41 percent say now is a good time to buy stocks, compared with 33 percent in December.

But concern about the federal budget deficit is growing. Obama's highest disapproval rating on any subject in the poll, 41 percent, is on handling the deficit.

Some well-known economists think Obama's biggest risk lies in too little government intervention rather than too much, an economic plan that stops well short of nationalizing large banks and relies on an unproven mix of public and private purchases of severely devalued assets.

"Restructuring the banking system is clearly the biggest disappointment" in Obama's overall economic strategy, Joseph E. Stiglitz, a prominent economist at Columbia University, said in an interview.

He recognizes the president faces unappealing choices. But Stiglitz worries that Obama, for all his departures from President George W. Bush's policies, is loath to shake up financial institutions as profoundly as needed.

Stiglitz is hardly alone. In a much-discussed New York Times column, economist Paul Krugman called Obama's plan a "cash for trash" proposal that "fills me with a sense of despair." He said private investors will profit if banks' "toxic assets," which are based mainly on failed mortgages, recover some of their value, while taxpayers will lose if they do not.

Obama addressed the criticism in a speech this month at Georgetown University. He said people ask him, "Why aren't you tougher on the banks?"

The reason his administration is stopping short of taking over banks, Obama said, "is certainly not because of any concern we have for the management and shareholders whose actions helped to cause this mess. Rather, it's because we believe that pre-emptive government takeovers are likely to end up costing taxpayers even more in the end, and because it's more likely to undermine than create confidence."

Obama's economic agenda has many other facets, and early assessments of them tend to run from fairly favorable to too-soon-to-tell.

The $787 billion stimulus bill drew negligible Republican support in Congress and has yet to play out. In the AP-GfK poll, 57 percent of those questioned said it's too early to say if the stimulus has helped the economy.

The administration's attempt to reduce home foreclosures includes incentives for lenders to modify subprime loans. It also calls for government purchases of mortgage-backed securities and greater federal oversight of derivative investments, which were central to the economic collapse.

Obama's effort to revamp the health care system is stirring strong debate, and Congress' eventual response is unclear.

Particularly contentious are his ideas for a public health insurance program to compete with private plans, and a funding mechanism that would reduce tax benefits for rich people making charitable donations.

Even less clear is how Obama will achieve his goal of reducing greenhouse gas emissions. His proposal to have companies buy and sell rights to emit such gasses is not popular in Congress, but no strong alternative has emerged.

For now, Obama is not backing away from this all-at-once strategy, even though Congress may choke on the heaped-high plate.

"If we don't invest now in renewable energy, if we don't invest now in a skilled work force, if we don't invest now in a more affordable health care system, this economy simply won't grow at the pace it needs to in two or five or 10 years down the road," Obama said at Georgetown.

Over the coming months and years, countless interest groups will issue report cards on his plan. In the first 100 days, Galston, the Brookings scholar, sums it up like this: "Stimulus package, check. Housing and mortgage rescue, too early to say. Rescue of financial institutions, probably not bold enough yet. Regulatory reform, the discussion has begun."